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Jobs Report Totally Disconnected From Markets

Written by: Joe Deaux05/03/13 - 4:41 PM EDT

Tickers in this article:
^DJI ^GSPC ^IXIC

NEW YORK (TheStreet) -- The markets are sending the struggling workforce a genial message: Thanks for the lift.

On Friday, April's headline unemployment ticked lower to 7.5% and nonfarm payrolls increased by 165,000, which boosted the Dow Jones Industrial Average and S&P 500 to historic highs. The problem, according to economists and investment strategists, is that there's disconnect between equity markets and the U.S. labor situation.

"The more active traders -- the ones that are more savvy and more actively involved in the market -- they understand the fact that unemployment doesn't move lockstep with the market" said Randy Frederick, managing director of active trading at Charles Schwab. "Generally what I find is when the market's moving higher, the unemployment rate lags about six to nine months behind."

Equities have soared in 2013, led by the Dow's 14% tear, the S&P's 13% gain and the Nasdaq's 12% jump.

A narrow spotlight on Friday's headlines may suggest equities and the labor market are correlated, but a dive into the rest of the employment situation reveals the slow transformation.

In April, hourly wages rose just 4 cents to $23.87, and the average work week showed a 0.2 hour dip to 34.4 hours. The seasonally adjusted U-6 total unemployed rate, which includes unemployed, underemployed and part time, rose to 13.9% from March's 13.8%. For broader context, the U-6 rate was 14.5% in April 2012.

"There has been progress in the last six months, in the last 12 months; it's just that it is achingly slow given how far away from full employment we are," Gary Burtless, a labor economist at Brookings Institution, said in a phone call from Washington D.C. "So if you're unemployed I guess there's no reason to break out the champagne."